We took advantage of the general market decline early in the year – particularly in Canada – and the exchange rate to buy stocks at bargain prices. Dollarama (Toronto: DOL) shares had fallen from a high of close to $94 to around $73 in early February when we bought the stock. Most of our clients are familiar with the “dollar plus” stores this company operates. With more than 900 stores across 10 provinces, it’s hard not to have noticed them. Financially, the valuation was higher than what we normally like to pay, but the company posts truly outstanding results in terms of organic growth alone, which is the opposite of growth through acquisitions. Dollarama has had annual earnings growth of 24% over the past five years and clearly intends to maintain this growth. The Rossy family is firmly committed to its shareholders, which was a decisive factor in our analysis.

As you already know, our primary criterion in selecting companies is one or more sustainable competitive advantages. Dollarama’s advantages are the strength of its brand and its distribution network. Most potential consumers believe that what they buy is cheaper at Dollarama. Management can gradually raise its prices without suffering any comparison effect. Customers will not change stores to “perhaps” pay a few pennies less for the same item and will probably not order these items online. This type of discount shopping seems to me to be a matter of proximity; from this standpoint, Dollarama has the best network in Canada.

Fanie pointed out to me that I’ve been talking to her about this company for at least four years. Nothing like my team to keep me humble… Be sure not to look at the chart!


This post has been excerpted from a June 2016 letter of the Robitaille Group at Desjardins Securities.

Disclaimer: The results shown are before management fees. This data reflects past performance and is not indicative of future returns. This document may contain statistical data cited from third-party sources believed to be reliable, but Desjardins Securities does not represent that any such third-party statistical information is accurate or complete, and it should not be relied upon as such. Alain Robitaille is registered as a portfolio manager with self-regulating organizations. He is authorized under IIROC Rule 1300 to make investment decisions and to give advice on securities for managed accounts. With the exception of Alain Robitaille, no member of Groupe Alain Robitaille may exercise discretionary authority with respect to a client’s account or approve discretionary orders for a managed account, or participate in the formulation of investment decisions made on behalf of or advice given with regard to a managed account. Each Desjardins Securities advisor named on the front page of this document, or at the beginning of any subsection hereof, hereby certifies that the recommendations and opinions expressed herein accurately reflect such advisor’s personal views about the company and securities that are the subject of this document and all other companies and securities mentioned in this document that are covered by such advisor. It is possible that Desjardins Securities has previously published other opinions, including ones contrary to those expressed herein. Such opinions reflect the different points of view, assumptions and analysis methods of the advisors who authored them. Desjardins Wealth Management Securities is a trade name used by Desjardins Securities Inc. Desjardins Securities Inc. is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF).